Scoppe: A roadmap to ethics reform

Lawmakers are working to restore public trust in government after a series of ethics scandals, but to get from here to there, we need to understand what an ethics and campaign finance law can and can’t accomplish — and why ours doesn’t accomplish what it should. We need a good roadmap.

GOV. MARK Sanford is fined for misusing state resources and campaign funds. Lt. Gov. Ken Ard is convicted for misreporting and misusing campaign funds. Sens. Jake Knotts and Kent Williams are reprimanded for accepting and concealing illegal campaign donations. Gov. Nikki Haley is cleared of illegally logrolling her position as a House member. House Speaker Bobby Harrell comes under SLED investigation for allegedly using his position to help his business and putting campaign funds to personal use.

Shadowy organizations pour money into campaigns against incumbents, without giving any clue as to who they are, where their money comes from or how much they’re spending.

A landmark national study says South Carolina is more susceptible to political corruption than all but five other states.

And simmering public discontent comes to a head when a poorly thought-out and badly interpreted law results in 250 challengers being kicked off of last year’s election ballots. This isn’t really an ethics matter, but because it involves a reporting requirement in the ethics law, it combines with three years of incessant political scandals to drive ethics reform to the top of legislators’ 2013 to-do list.

Special House and Senate panels have proposed significant changes, and last month Gov. Haley’s Ethics Reform Commission unveiled an impressive package of proposals that would address nearly all of the problems. Over the coming weeks, the Legislature will sort through those proposals, with a goal of restoring public trust in our government.

But setting public confidence as a destination and actually arriving there are very different things. Every politician, it seems, has a favorite silver bullet — and many of them have a list of no-go ideas, proposals that hit just a little too close to home.

To make sure we arrive at our destination, we need to understand what an ethics and campaign finance law can and can’t accomplish — and why ours doesn’t accomplish what it should. We need a good roadmap.

The goal: Put public interest first

The problem with South Carolina’s ethics law isn’t that so many people are getting caught violating it. If anything, that suggests it’s working — though not in the best way.

The problem is that so many people are doing unethical things (most prominently, Ms. Haley) that do not violate the law.

The problem is that an untold number of public officials are violating it, but we don’t have any way of knowing they are. And even more are doing unethical things that are not illegal, and we don’t know about them either.

The purpose of an ethics law is simply this: to prevent public officials from serving their own personal interests or the interests of their campaign donors at the expense of the public interest.

No law will ever completely accomplish this, because some people will break the law and not get caught, just as some people commit murder and never get caught. And no law can deter politicians who define their personal interests as doing popular but irresponsible things that win votes.

But by requiring full reporting of potential conflicts of interests, by outlawing some behaviors that involve conflicts, and clearly defining where the lines are, and by creating a muscular enforcement mechanism with serious penalties, we make it much harder for public officials to put their interests above ours.

End legislative self-policing

We’ve always known we risked an unenforced law when we allowed the House and Senate Ethics committees to judge legislators’ compliance. Compounding the problem, the complaints were all secret, so there was no way of knowing whether the panels were taking serious complaints seriously. And that very secrecy kept the problem below most people’s radar.

It took the House opening the process slightly, and its Ethics Committee dismissing complaints against a House member turned governor, to catch the public’s attention.

Ironically, the committee was right: It was perfectly legal for then-Rep. Haley to try to convince her fellow lawmakers and DHEC officials to come to the aid of the hospital that was paying her salary. Perfectly legal for her to pocket more than $40,000 in consulting fees from a government contractor that paid her for her “good contacts.” Unethical. But legal.

And now the attorney general has asked SLED to investigate Mr. Harrell, implicitly agreeing with the director of a libertarian think tank that the House Ethics Committee has “an inherent conflict of interest.”

S.C. Policy Council President Ashley Landess charges that Mr. Harrell broke the law when he engaged in what one member of the State Pharmacy Board suggested was improper behavior to convince the board to let his business sell repackaged pharmaceuticals. She also charges that he improperly reimbursed himself $280,000 in campaign funds over the past four years, mostly for flights on his single-engine plane and for legislative work done by an assistant who works for his insurance agency.

Unlike Ms. Haley, Mr. Harrell is popular among House members and holds a great deal of power over them. He also controls the House staff, which means the attorney who provides legal advice for the Ethics Committee works for him. I don’t know whether Mr. Harrell violated the law, but if this situation doesn’t illustrate the problem of partiality, nothing does.

Legislators have argued for years that it takes a constitutional change to end their self-policing. Clearly, only the House or Senate can suspend or expel a member, but it strains credulity to suggest that no one else can investigate, issue fines or bring criminal charges against lawmakers for violating state law.

And that’s all we need: for a state commission to receive and investigate complaints and apply the sanctions spelled out in state law. If the House and the Senate want to impose further punishment, or punish members for actions not prohibited by law, they can do that separately.

Report income from all sources

Gov. Haley also has driven demands for more complete income reporting, both deliberately and inadvertently. She already was advocating that when we learned that she had been paid handsomely for work that posed a potential conflict but that she didn’t report, because the reporting requirements are so skimpy and the interpretation of those requirements so bizarre.

Officials must report only income they receive from government, lobbyists or lobbyists’ employers, or organizations that contract with their agency. Ethics officials say they need report only “salaries,” not money from contracts, a goofy interpretation if ever there was one, and that a legislator only has to report income from those who contract with the Legislature, not with all those agencies the Legislature has so much control over.

But remember: The purpose of income disclosure is to show us when legislators’ personal interests might conflict with the public interest, and the list of people looking for legislative favors extends far beyond organizations that hire lobbyists or contract with the Legislature. Think, for instance, of people who want tax changes that benefit them, and the groups pushing ideologically driven initiatives, and anybody who wants a DHEC permit or a contract to sell computer systems or cars or gas to state agencies.

The governor wants full income reporting, and I’d be happy to have that, but her commission legitimately worries that would be asking too much of part-time legislators. It said it’s sufficient to know that a public official is receiving money from Company X. The amount of income would have to be reported only if Company X has a lobbyist or has a contract with or is regulated by the public official’s agency.

And that might be enough, as long as legislators have to report the amount of income — or at least income ranges — they receive from businesses doing business with all of state government, not just with the Legislature.

Regardless of how detailed it is, a fuller income-disclosure law increases the chance that businesses and legislators would be called on to explain their relationships, and that decreases the chance that they’ll engage in inappropriate relationships.

But making those relationships public isn’t always enough, particularly for officials in safe seats, so we need some prohibitions. Currently, we prohibit lawmakers from voting in many cases when they stand to gain financially. But they’re free to participate in the debate, lobby their fellow legislators and, some argue, vote in committee.

All of that needs to be outlawed, and the voting prohibition should extend to matters that could hurt them financially.

Close campaign finance loopholes

Our campaign finance law has two major components: reporting and restrictions.

Candidates and committees must report all contributions and expenditures quarterly, and just before an election.

Donations are limited to $3,500 per election to statewide officials and $1,000 to legislative and local candidates. And candidates can’t use donations for personal expenditures, as Mr. Ard did, to pay for clothing and computer games and a family vacation, and as Mr. Sanford did to a lesser degree, and as some say Mr. Harrell did.

But the law has gaping loopholes:

• Donors set up multiple limited liability corporations, each of which can max out its donations to a candidate. So someone with 10 paper companies can donate $35,000 to a candidate for governor instead of just $3,500.
• The final pre-election reports are current only up to 20 days before the vote, so candidates wait until they’re inside that blackout period to accept donations that might turn off voters.
• Candidates must keep a list of their campaign donors’ occupations, just as federal candidates do, but they don’t have to report that information. This looks like another case of sloppy law-writing, but since the Legislature has refused for a decade to correct it, I’m starting to think it was a deliberate effort to mislead the public into thinking the law requires more than it does.
• Since a federal court invalidated reporting requirements for independent entities in 2010, shadowy groups have spent untold amounts of money to run hit campaigns against several legislators. It was reminiscent of the video-poker barons’ assault on our state more than a decade ago, which led lawmakers to pass the reporting requirement that the court struck down.
• Elected officials form leadership political action committees, which can collect $3,500 from each donor. That doubles the donations to statewide candidates, and since legislators are limited to $1,000 from each donor, the leadership PACs allow them to collect 4.5 times as much money. The PACs can give the money to other candidates, which candidates can’t do with their regular campaign funds. It’s essentially money laundering: The donors curry extra favor with whoever receives their laundered PAC donations, and those recipients are indebted to the official affiliated with the PAC, which makes that official even more indebted to the donors.
• It’s not clear what is and isn’t a personal expenditure or how much detail must be reported, particularly when candidates reimburse themselves for expenses (see Ard, Ken; Sanford, Mark; Harrell, Bobby). How to calculate the value of in-kind donations isn’t clear either, as we saw with Mr. Harrell’s use of his own plane and Ms. Haley’s use of a supporter’s plane.

These loopholes can and should be closed, by requiring reports of campaign donations and expenditures to be filed online, with real-time filing during the final weeks before an election; requiring candidates to report the occupation data they collect; restoring the law that requires outside organizations to report their campaign spending; outlawing donations by paper corporations; and writing clearer definitions.

Give enforcers tools, staff to do job

Laws work by setting standards of behavior, which honest people obey because they’re the law; by deterring people who are afraid of getting caught; and by punishing people who violate them. But deterrent works only if the punishment and the risk of getting caught are high enough. And they’re not.

Absent a complaint, the most the State Ethics Commission and legislative committees are able to do is make sure disclosure reports are filed on time, all the blanks are filled in, donations don’t exceed the legal maximums and the numbers add up.

So the only people likely to get caught accepting illegal donations or spending money illegally are those who report doing so — that is, those who make honest mistakes. People who deliberately hide or disguise donations or expenditures get caught only if the stars happen to line up perfectly.

That’s what happened with Mr. Ard, whose sketchy reporting provoked closer public scrutiny. It also happened with Sens. Knotts and Williams, whose cases are the most disturbing examples of our law’s shortcomings.

Mr. Knotts accepted $25,000 in campaign donations above the legal limit and hid the names of some donors. No one would have known if he hadn’t made such a mess of his campaign account that he turned his bank records over to the Senate Ethics Committee for help sorting it out.

The scenario repeated itself two years later with Mr. Williams, whose $13,000 in illegal donations were reported in ways the panel called “deliberate attempts to mislead the public.”

We can increase candidates’ incentive to be honest by greatly increasing the fines for violations. And we can give ourselves a fighting chance of catching those who aren’t honest by conducting random audits — like the ones the IRS does on taxpayers to see if they’re claiming bogus deductions or leaving off income — to make sure that all the money that flowed into and out of the campaign account was reported, and to check names on the reports against bank records to make sure they match up.

But the best enforcement tools in the world won’t do any good if there’s no one to use them. And right now, there’s not. Of the three ethics enforcers, only the Senate committee has the staff to conduct the most rudimentary of routine reviews.

That has to change.

As long as we skimp on enforcement, our law won’t be enforced. And no matter how tough it looks on paper, it won’t restore public trust in government.

So as lawmakers work through the ethics proposals, here’s the key test of their sincerity and the value of their work: Do they give the Ethics Commission enough staff to enforce the law?

If not, then this is just another exercise in deception.

Ms. Scoppe can be reached at cscoppe@thestate.com or at (803) 771-8571.